Strategy, CE, Tech, Climate Change, Innovation, and Entrepreneurship

Scenario Planning

Monday, March 03, 2008

Using newspaper headlines and articles, the Global Strategy Institute at the Center for Strategic and International Studies (CSIS) has put together a web site with an explorable map called "Mapping the Future." The map links together what I'd call Events in various categories such as Science, Politics, Construction, and Sporting & Culture arrayed over a time line from 2008 to 2012. Clicking on various Events pops up the article or information underlying the headline.

What's interesting is that various "threads" meet at certain points. For example, in 2012 the Science, Forecasts, and Important Dates threads intersect with these headlines:

Worldwide CO2 emissions reach 20.7 tons per person per year

Expiration of the Kyoto Protocol

Oil demand out paces production in non-OPEC countries

It's unclear what CSIS intends. Event sequences and confluences can be both informative and suggestive as may be the case with this map. At the same time, Event sequences don't constitute in and of themselves a scenario, which should, in my view, be a narrative with plot, actors, motives, Events, etc. leading to a particular integrated vision of a possible future outcome, or Endstate. More information on Endates, Events, and the Scenario Mapping(tm) methodology may be found in this presentation.

Thursday, February 14, 2008

As noted, my former colleagues at NCRI created a form of scenario planning called Future Mapping that improved upon scenario processes pioneered in the business world by Royal Dutch Shell. I was the founder of a series of public workshops on the the Future of Information Commerce that were held in the early 1990s. After my departure for Silicon Valley, my former colleagues continued the workshop. Thanks to the Wayback Machine, I've been reviewing selected results from a 1997 edition of the workshop. The full original report is here; a presentation (PDF) on the Scenario Mapping(tm) process is here.

Public workshop participants are asked to rank the Endstates in terms
of Desirability and Attainability. Each person is assigned to a team
which analyzes their assigned Endstate and then delivers a 15-20 minute
presentation that explains how the world got to be that way. Following
all the team presentations, participants are asked to re-rank the
Endstates.

Thursday, January 24, 2008

To rewind just a bit, my former colleagues at NCRI created a form of scenario planning called Future Mapping that improved upon scenario processes pioneered in the business world by Royal Dutch Shell. After I had departed for Silicon Valley, they continued a series of public workshops on The Future of Information Commerce. The results are available here via Internet Archive's Wayback Machine. An overview of what I call (for trademark reasons) the Scenario Mapping process is provided in this presentation.

Working in teams, workshop participants decide which of 150 plausible Events provided by the facilitators Must or Must Not happen if the team's assigned outcome or Endstate is to be realized. Events that are Common to a majority of scenarios are called Common Events. These are worth added attention because, generally speaking, more industry stakeholders have an interest in these Events. In the 1997 workshop, 12 events appeared in a majority of scenarios. Here they are with my comments.

Wednesday, January 23, 2008

Earlier I noted Paddy Briggs' critique of Royal Dutch Shell's use of scenario planning. Writing in the Scotsman, George Kereven reports an interview with James Smith, the chief executive of Shell UK that focused on Shell's thinking regarding what I call the Wicked Problem of Global Climate Destruction. According to Kereven, there are two paths the world could take that Shall calls "Scramble" and "Blueprints".

Tuesday, January 22, 2008

As noted, my former colleagues at NCRI ran a public scenario planning workshop on Mapping The Future of Information Commerce in 1997. The results are summarized here. The time horizon for the Endstates was 2002.

Near the outset of a Scenario Mapping (nee Future Mapping) workshop, teams are asked to vote a database of plausible Events either Highly Likely (>=80%+ probable), Highly Unlikely (<=20% probable), or Uncertain. Using the voting results, the facilitators then construct and present a Conventional Wisdom scenario. The Conventional Wisdom scenario reflects the thinking of the "room" at the outset. To paraphrase former Royal Dutch Shell scenario planner Arie P. de Geus (Planning as Learning, HBR, 1988): If you want to change people's thinking, you first have to show them how they think.

Here are the main themes of the Conventional Wisdom scenario from the 1997 workshop as summarized in the published report. I have added my commentary after each bullet.

High bandwidth will be widely available, affordable, and
in demand by large segments of the population fairly soon (2-3
years).

Actually, it took what some might think a long time in the US for substantial broadband penetration and even now, the US lags some of the developed world both in penetration and typical broadband speeds.

Monday, January 21, 2008

As noted, my former colleagues at NCRI ran a public scenario planning workshop on Mapping The Future of Information Commerce in 1997. The results are summarized here. The time horizon for the Endstates was 2002. As summarized in the report, the key learnings that emerged from this scenario planning workshop included the following bullets. I've added commentary below each.

Major advances in Internet technology and function are virtually
inevitable.

Sure. Greater bandwidth enables new applications.

These improvements are likely to erode the passive entertainment
consumption paradigm (and accompanying advertising-based business
models) that characterize traditional consumer "TV culture"
in the U.S.

Yes and no. Workshop participants didn't anticipate the rise of advertising based business models that have become pervasive on the Web. However, User Generated Content, multiplayer games, and similar applications / activities / contexts are a move away from passive viewing. And TV viewership seems to be declining.

Royal Dutch Shell has long been seen as one of the early business scenario planning pioneers. Scenario Mapping(TM) [nee Future Mapping] form of scenario plannning was created by Dave Mason, Jim Herman, and others at NCRI with awareness of Shell's methods.Paddy Briggs, who retired from Shell after 37 years, isn't so upbeat on Shell's use of scenarios. Briggs' main point is that Shell uses scenarios for public relations and that their scenarios have little actual impact on corporate decision-making and shareholder value. After discussing several examples of how scenarios made no difference to Shell's decision-making regarding China and Russia, Briggs concludes:

The invitation to [Shell CEO] Jeroen van der Veer to speak to world leaders at Davos will no doubt give him a warm glow that he, and Shell, are legitimate movers in the refined air of the “World Economic Forum”. And there will no doubt be approval of the new scenarios as I am sure that they will be as intellectually solid and stimulating as ever. But if pressed (as he should be) to give one example of how these scenarios are actually to be used in Shell strategic decision-making he will struggle. Because there is no evidence at all that Scenario planning has made a hapeworth of difference to Shell’s actions or performance over the years. Like so much of the public face of Shell the rhetoric is a long way from the reality.

A constant theme in my strategy work and writings is that scenarios only have value if they are well-integrated into decision-making and subsequent action. It appears that Briggs would agree.

Friday, January 11, 2008

In 1990-1991, the Association of American Publishers co-sponsored a series of public workshops on Mapping the Future of Publishing that I conducted with my then colleagues at NCRI. Later on, I morphed these public workshops into Mapping the Future of Information Commerce. After I departed NCRI at the end of 1995 my former colleagues ran additional installments of the Information Commerce workshop in 1997. Thanks to the Wayback Machine at the Internet Archive, the report is available on the net here.

I thought that it might be a very interesting and possibly useful exercise to return to those days of yesteryear and see what knowledgeable industry participants thought about the future of the information industry and with the benefit of 20/20 hindsight compare their thinking to what actually happened and where we are now.

The Future of Information Commerce workshops used a highly interactive scenario planning process that in these pages is called Scenario Mapping. In addition to the discussion in the report itself, an overview of the Scenario Mapping methodology can be found in this presentation.

In brief, a Scenario Mapping workshop combines "simulated hindsight" with a highly prepared meeting to leverage the collective intelligence of workshop participants. By simulated hindsight I mean that we assume the future is now and ask how the world got to be this way: what were the key milestones, actors, motives, drivers, etc. that led to this world rather than some other.

By highly prepared meeting, I mean that the facilitators in conjunction with workshop sponsors prepare several coherent descriptions of future outcomes or Endstates and a set of hypothetical Events. Each Event has a headline, date, and brief description.

In this series of blogicles, I'll provide snapshots of the Endstates used in the 1997 Information Commerce workshop, summaries of the deliberations, and report on how participants voted on the Endstates and Events. I'll also focus on the "compares and contrasts" with the present.

Monday, November 19, 2007

David Flint, a UK management consultant, recently tried his hand at devising scenarios for the future of Global Climate Change. A pessimist might see his three scenarios as Dark, Darker, and Positively Darkest. Or not. Nonetheless, Flint's ideas are provocative if nothing else. Snippets:

Scenario 1: Lifeboat

In this scenario the nations do collaborate soon enough to restrain CO2 emissions and the increase is kept below two degrees.... The key assumption for this scenario is that the nations collaborate but this collaboration will not be easy. As
with the General Agreement on Tariffs and Trade (GATT) there will be
disputes and we will need a World Climate Authority (WCA), analogous to
the World Trade Organisation, to deal with them.

Scenario 2: Police World

In scenario 2 the nations have begun to collaborate against climate change but not in time. By 2050 the temperature rise has already exceeded two degrees and major positive feedback effects are visible.... It’s clear that the Earth cannot support
its current population and that existing human institutions cannot
survive the huge population movements that these changes will provoke.

Scenario 3: New Dark Age

In this final scenario attempts to international collaboration have failed to prevent temperature rises and have broken down. As
the value of those cold regions in which people will be able to survive
becomes clear those nations with such regions will prepare their defences. The others will attempt to negotiate access to these regions. When this fails they will resort to war.

As Bob Horn and I point out in our White Paper on Wicked Problems, thinking about alternative futures (or Endstates) is just the beginning. The much more difficult questions concern what are the key Events or milestones leading to each possible outcome, what is the most desired outcome, and who will be responsible for taking action and at least trying to influence the course of future Events. Nonetheless, Flint deserves credit for trying to untangle the climate change Mess.

Google. In our "GOOD" scenario, revenue growth
merely slows--to 20% a year. (Google fans will argue that Google's
growth won't slow at all because advertisers have perfect visibility
into ROI, half of the business is international, etc. There are
counter-arguments to each of these points, but you can make your own
assumptions). Expense growth in this case also slows to 20%. Google
is a supertanker whose expenses are currently growing more than 65% per
year, so slowing expenses this much would be very "GOOD." In any case,
in this scenario, Google's margins hold and operating profits grow
20%--nice, but short of what Wall Street is probably expecting.

In our "BAD" Google scenario, revenue flattens, and the company
reigns in expense growth to 10% year (heroic). In this case, revenue
stays the same, but the operating margin drops from 29% to 21% and
operating profit drops by a third. (Imagine how Wall Street will react
to that). We won't tell you about the UGLY case--you can see for
yourself.

Wednesday, July 25, 2007

The Register (UK) has an article on the US DoD's use of simulation to explore a wide range of scenarios.

Called the Sentient World Simulation (SWS), it will be a "synthetic
mirror of the real world with automated continuous calibration with
respect to current real-world information", according to a concept
paper for the project.

"SWS provides an environment for testing Psychological Operations
(PSYOP)," the paper reads, so that military leaders can "develop and
test multiple courses of action to anticipate and shape behaviors of
adversaries, neutrals, and partners".

SWS also replicates financial institutions, utilities, media
outlets, and street corner shops. By applying theories of economics and
human psychology, its developers believe they can predict how
individuals and mobs will respond to various stressors.

1. You shall always have a crisis plan and keep it handyResponsible
management and practitioners of good corporate governance in South
Africa ensure that their companies and organisations have a fully
fledged PR crisis plan that deals with all eventualities. The plan must
be based on a bespoke vulnerability and risk audit and scenario
planning, and must integrate into an organisation's supply chain and
business continuity plans.

Monday, July 09, 2007

I don't do forecasts or predictions. Indeed, the strategy work I've done using Scenario Mapping / Future Mapping consciously avoids making forecasts, preferring instead to consider alternative and divergent outcomes and what would have to happen for each outcome to become reality.

Monday, June 25, 2007

Recently, someone pointed out to me that Future Mapping / Scenario Mapping / Problem Resolution Mapping is a form of Backcasting, a set of strategic planning techniques that work backwards from some assumed future. In researching the use of "backcasting," I found this presentation from the Information Architecture 2007 Summit by Matthew Milan and Sam Ladner that provides a high level overview of how they use Backcasting in client engagements.

I'm a big fan and practitioner of "cards on the wall" meetings (or in Milan and Ladner's case, of Post-its on the wall). Their form of Backcasting and Scenario Mapping share some common assumptions, including: assuming divergent futures, working backwards, avoiding the forecasting frame, interactive discovery, and participant ownership of the results.

In over-viewing the history of Backcasting, Milan and Ladner indicate (slide 11) that the '90s saw the development of "big backcasting," whose liabilities (slide 12) include projects that are complex undertakings, resource intensive, and time consuming. Locating most Scenario Mapping projects in their "big backcasting" category, they have a point. The question is whether these are really liabilities.

Milan and Ladner also indicate that "big backcasting" projects are inaccessible to non-experts. If they mean that the content, results, and recommendations are inaccessible, I would quickly disagree. If they mean that actually facilitating / leading / doing a "big backcasting" project is difficult for non-experts, that often seems to be the case.

When clients have attempted to do Scenario Mapping projects without the involvement of consultants, with rare exceptions they find it difficult to do successfully. Consultants who do a lot of these projects have a wide range of experience to call upon. Internal facilitators usually do these kinds of projects less often. Although they may understand the process, they typically lack a wide range of Scenario Mapping project and facilitation experience. Consequently they often lack knowledge of the many variations and options available to facilitators.

There is another reason why Scenario Mapping is often difficult for non-experts. One of the requisite skills is the ability to assemble, prioritize, synthesize, and "chunk" a very large amount of information. Although this skill can be taught, it seems to require some basic facility. For example, certain Myers-Briggs types are often particularly adept, INTJs and many ENFPs, for example. Thus not everyone will be able to facilitate successfully a "big backcasting" project based on processes such as Scenario Mapping.

There's probably a set of clients for which the Milan-Ladner form of Backcasting is appropriate and cost effective. Although I have not been a participant in any of their projects, I believe that bottoms up, made-up-on-the-spot engagements provides an excellent brainstorming context, a forum for idea generation, and some good ideas that are actionable.

However, you get what you pay for. Scenario Mapping is more complex, more resource intensive and more time consuming. As noted, Scenario Mapping combines simulated hindsight or Backcasting with a high prepared meeting. The work that goes into meeting preparation lays a foundation for more informed decision-making, developing a clear set of action priorities, and in many engagements, the association of responsibilities with action items.

Scenario Mapping participants routinely report that strategy setting aside, they leave
with a much expanded personal knowledge base and views of their
company, industry, markets, technologies, etc. Although time consuming
and perhaps complex, this knowledge base
becomes a valuable resource that clients typically draw on post
meeting. In short, Scenario Mapping challenges and then enhances the
mental models of workshop participants.

While change on the level showcased in these scenarios happens because of many different trends and events in society, using one sector to frame each scenario allows us to consider a particular angle or ‘take’ on those factors that shape Hawai‘i’s futures. Despite this framing, factors from many areas, and from different levels, were taken into account when we created the scenarios. It is important to remember that these scenarios are not predictions, but rather exercises in exploring how and why Hawai‘i may change.

Each scenario stresses a different sector: Social, Economic, Environmental, and Political.

“Cultural Fragmentation” (Social): The myth of the melting pot is exposed.

“Towers of Tomorrow” (Economic) Population growth and urbanization reshape Hawai‘i.

Monday, June 04, 2007

In graduate school many years ago, I worked with a professor from Canada who believed that eventually the United States would consider annexing some or all of Canada in order to gain access to that country's water resources. Anything is possible.

TERI-BCSD (Business Council for Sustainable Development) India in association with the Bombay Chamber of Commerce and Industry & The Leela Group of Palaces, Hotels and Resorts is organising a national workshop on Water Scenarios for Indian Businesses on 05 June 2007 (World Environment Day) at The Leela Kempinski, Mumbai. Mr. SM Krishna, Honb’le Governor of Maharashtra will be the chief guest and will deliver a special address.

Water allocation problems include:

In the National Water Policy and several state policies water allocation to industry is at the bottom of the priority list. Keeping this in view, sustained supply of freshwater becomes a critical issue for the survival of many industries especially water-intensive industries. The risk that industry faces today can be measured in terms of situations that have occurred where water stress, measured in terms of both availability and quality, has led to an increase in water costs, growth in business disruption and increased concern among the stakeholders about companies’ water-related performance.

Tuesday, May 29, 2007

Scott Moeller, coauthor of a book on the use of business and military intelligence in M&A deals and CEO of Executive Education at Cass Business School in London, England, points out that Scenario Planning can be helpful in thinking about M&A deals. Exactly so.

Scenario Planning is "fractal." It can be used to address risk and uncertainty at the product, business unit, and corporate levels. Understanding possible trajectories for industries, markets, portfolio
companies, and possible acquisition targets enables CEOs and Directors
to evaluate possible futures and to choose their most desirable future
and identify the key events and milestones leading to that future.

Sometimes it's useful to look a the future of the key business units and then at the future of the company and its portfolio of companies. Such a sequence of Scenario Planning projects can help the CEO and Directors approach acquisition and divestiture using more rigorous tools to evaluate many possible outcomes.

For example, one project for a Fortune 500 company convinced the CEO that he should sell a particular business unit because the competencies needed for success were fundamentally different than his other portfolio companies. His principal businesses essentially required making bets on 30 year capital investments in manufacturing plants where technologies evolved slowly. The business sold required competence in managing in markets whose technologies and structures were rapidly evolving.

Thursday, April 05, 2007

Being able to anticipate many different scenarios is one of the keys to success on a global scale:

As a consequence of complex technology, multiple regulatory
regimes and a trend towards geopolitical tensions, risk is becoming more complex.
This requires that executives be extremely attuned to establishing control and
risk management mechanisms and that they possess the foresight needed to
anticipate many different risk scenarios.

To be successful in this rapidly changing global environment, CEOs thought four characteristics were key:

Possess vision–
Exploiting the potential of ever-expanding markets and harnessing the power of technology
and innovation requires vision. Global executives must possess the vision
required to redefine their business models. They must also be able to inspire,
motivate and empower their people to fulfill that vision.

Demonstrate agility– The
successful global executive will be agile enough to react to rapidly changing
business conditions and to collaborate in support of new business models.

Become global citizens–
In the global marketplace, parochial or territorial thinking will not suffice. Global
business leaders must embrace diversity, understand and be able to reconcile
cultural differences, and contribute in meaningful ways to the communities in
which they do business.

Show courage– Important at any time, courage is even more necessary in
an environment defined by uncertainty and increased risk. The courageous
business leader boldly embraces new opportunities, responds to new risks and
takes on new responsibilities. Such a leader is prepared to make tough
decisions to ensure that the needs of sometimes competing stakeholders are
fairly and equitably met.

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Strategy Kinetics, and its network of affiliated consultants, can help CEOs anticipate alternative futures, manage in the face of uncertainty and complexity, reduce risk, and develop and implement strategies that are responsive to rapidly changing conditions. Email us to find out how.

Tuesday, February 14, 2006

Teresa M. McAleavy, a journalist writing for NorthJersey.com, reports that that the Society for Human Resource Management has conducted a scenario planning exercise on the future of HR professionals. [The full report is available only to SHRM members]. The news article reports four possible future roles for HR professionals:

Monday, January 23, 2006

Management-Issues.com, a UK site that "focuses on the leadership, management and people issues that are at the heart of the changing workplace," has an article reporting results from a survey conducted by Ernst & Young and recruiter exec-appointments.com of 50 non-execs age 50 or under. The survey suggests that there is a diminished talent pool from which major UK public companies can recruit. Among the talents deemed in short supply are individuals and boards who can provide strategic leadership.

The research also uncovered a consistent undercurrent of anxiety over the low priority given to strategic and scenario planning.

"The overarching picture is that there is a real and worrying call for better board strategies, backed by rigorous scenario and contingency planning," the report warned.

"Few are satisfied that their board process delivers the quality of forward-looking plans that will enable them to deliver expected results," it added.

Thayer [CEO of exec-appointments.com] argued many non-execs were not comfortable that they were sufficiently engaged in strategy, that development strategies were not being developed which explored multiple scenarios and not enough time was being given to debate and refine proposed strategies.

Thursday, December 15, 2005

Lakis Polycarpou blogs about energy use and urban planning. We share a deep appreciation of Jane Jacob's thinking about urban development.

On the Raise The Hammer site, Polycarpou has written a set of scenarios that deal mainly with impact on suburbia of "peak oil": the idea that oil is a finite resource and that we are using oil faster than we are discovering new reserves. Having examined scenarios that mainly focus on the impact of peak oil on suburbia, Polycarpou suggests the following conclusions:

Even with oil supplies in decline, it seems at least plausible that a great portion of the resources now spent building sprawl could be diverted to retrofitting and revitalizing suburbia.

If, instead of building more spread out, single use neighborhoods and strip-malls, we used our current building energy for infill development (using principles of density, walkability and mixed use currently associated with "New Urbanism" but known since Jane Jacobs wrote The Death and Life of Great American Cities in 1961), we could begin generating an ever-more efficient economy, and perhaps stretch out the tail of oil depletion.

The highest priority, then, should be to stop current and future sprawl development.

Tuesday, November 22, 2005

SCOTLAND could develop into a "dynamic country" with a "bohemian
culture" attracting wealthy tourists from the developing nations, or it
could become like a third world nation with a few visitors in "gated
resorts" catering for high-rollers.

Thursday, October 20, 2005

According to this press release, The Society for Human Resource Management (SHRM) has developed a report that looks at four scenarios for the workplace in the year 2015. Based on based on business competition and the availability of talent and organizational structure, SHRM believes that these scenarios may help prepare HR professionals for future business requirements and what key competencies in HR will be needed to help their companies succeed a decade from now. Snippets:

Monday, October 03, 2005

Some believe in the theory of radical empiricism, namely, that "data speak for themselves." Not so. Data always need to be spoken for. Narrative is one important way of speaking for data and other information.

Complementing my earlier scribblings on the role of narrative (storytelling) in scenario planning, marketing ace Paige Arnof-Fenn has a useful article on the importance of storytelling in sales and marketing. Snippets:

Thursday, September 29, 2005

The Chronicle of Philanthropy has an article on the International Storytelling Center in Jonesborough, TN, that characterizes stories about desired futures as a form of scenario planning. Many forms of scenario planning are based on projecting quantitative models into the future, each projection based on a different set of assumptions. Other forms of scenario planning string together event sequences, each event sequence constituting a different scenario. "This happens then that happens" is the basic form.

As developed by NCRI, Future Mapping [also see Art Hutchinson's 5 part series on scenario planning that begins here.] entails scenario as narrative. It's about storytelling with characters, plots, and key events. The characters might be companies, governments, markets, industries, and even well-known industry leaders as representatives of their companies. Bill Gates (Microsoft) and Larry Ellison (Oracle) come to mind as exemplars.

Stories are among the key scenario planning ingredients because the narrative form makes the scenario more understandable; everyone loves a great story. Stories also bind together the diverse actors, forces and events that comprise a scenario.

Monday, September 26, 2005

Fortune Magazine has an article by columnist Geoffry Colvin addressing risk management. Many companies have failed to learn the key lessons of risk management, including the need to build scenarios. Colvin writes:

Tuesday, September 13, 2005

Sunday's Washington Post has an article by Joel Garreau that addresses the rise and fall of world-class cities. One highlight:

How a city responds to disaster is shaped both by large outside forces and internal social cohesion. Chicago rebuilt to greater glory after the fire of 1871 destroyed its heart. San Franciscans so transformed their city after the earthquake and fire of 1906 that nine years later they proudly hosted the Panama-Pacific International Exposition to toast the Panama Canal and their own resurrection.

Not long ago, I co-taught a team of George Mason University students in a semester-long scenario-planning course aimed at analyzing which global cities would be the winners and losers 100 years from now. The students were keenly aware of the impact that climate change might have on their calculations, among hundreds of other factors. Yet in the end they could not bring themselves to write off such water cities as New York and Tokyo. They simply wouldn't bet against the determination and imagination of New Yorkers and the Japanese. As someone put it at the time, "If it turned out New York needed dikes 200 feet high, you can just hear somebody saying, 'I know this guy in Jersey.' "